EOG EOG Resources Inc

HOUSTON, Feb. 27, 2017 /PRNewswire/ -- 

• Exceeds High-end of Fourth Quarter and Full Year 2016 Crude Oil Production Targets
• Beats Fourth Quarter and Full Year 2016 Targets for Lease and Well, Transportation and DD&A Expenses
• Achieves Record Capital Efficiency Gains in 2016
• Replaces 163 Percent of 2016 Production at Low Finding Cost of $5.22/Boe (Excluding Price Revisions) and Increases Total Net Proved Reserves by 1.4 Percent in 2016
• Targets 18 Percent Crude Oil Production Growth for 2017 within Cash Flow at Flat $50 Oil
• Forecasts Flat to Lower Well Costs in 2017

EOG Resources, Inc. (NYSE: EOG) (EOG) today reported a fourth quarter 2016 net loss of $142.4 million, or $0.25 per share. This compares to a fourth quarter 2015 net loss of $284.3 million, or $0.52 per share.  For full year 2016, EOG reported a net loss of $1.1 billion, or $1.98 per share, compared to a net loss of $4.5 billion, or $8.29 per share, for the full year 2015. 

Adjusted non-GAAP net loss for the fourth quarter 2016 was $6.7 million, or $0.01 per share, compared to adjusted non-GAAP net loss of $149.5 million, or $0.27 per share, for the same prior year period.  Adjusted non-GAAP net loss for the full year 2016 was $892.6 million, or $1.61 per share, compared to adjusted non-GAAP net income of $33.9 million, or $0.06 per share, for the full year 2015.  Adjusted non-GAAP net income (loss) is calculated by matching hedge realizations to settlement months and making certain other adjustments in order to exclude non-recurring and certain other items.  For a reconciliation of non-GAAP measures to GAAP measures, please refer to the attached tables.

Higher crude oil, NGL and natural gas prices, significant well productivity improvements, and lease and well cost reductions resulted in increases in adjusted non-GAAP net income, discretionary cash flow and EBITDAX for the fourth quarter 2016 compared to the fourth quarter 2015.  For a reconciliation of non-GAAP measures to GAAP measures, please refer to the attached tables.

Operational Highlights
Tremendous capital efficiency improvements in 2016 offset the impact of a significant reduction in capital expenditures resulting from low oil prices.  2016 total company crude oil and condensate volumes declined less than one percent to 282,500 barrels of oil per day (Bopd) while exploration and development expenditures (excluding acquisitions) decreased 42 percent compared to 2015.  Increased development activity and significant well productivity improvements drove substantial volume increases in the Delaware Basin, with additional growth from the Powder River and DJ Basins.  These contributions were offset by volume declines in the Bakken and Eagle Ford resulting from lower activity levels.  Natural gas liquids volumes grew 6 percent while natural gas volumes decreased 7 percent primarily due to natural decline and the sale of the company's Barnett and Haynesville Shale dry gas assets.  Compared to the same prior year period, lease and well expenses decreased 20 percent and transportation expenses decreased 8 percent, both on a per-unit basis.  Total operating costs, which includes lease and well, transportation, gathering and processing, and general and administrative expenses, were down 15 percent year over year.

"EOG achieved near company-record returns on new capital in 2016 in spite of the lowest crude oil prices in 13 years," said William R. "Bill" Thomas, Chairman and Chief Executive Officer.  "Through continued improvements in well productivity, cost reductions and expanded resource potential, EOG is positioned to excel as crude oil prices continue to recover.  More than ever, EOG continues to lead the industry through its innovative technology and disciplined culture."

2017 Capital Plan
EOG's 2017 plan is designed to maximize returns and grow crude oil volumes while maintaining a strong balance sheet through disciplined spending.  EOG expects to grow total company crude oil volumes by 18 percent, assuming investment and dividend payments within cash flow at a $50 average oil price.

Capital expenditures for 2017 are expected to range from $3.7 to $4.1 billion, including production facilities and gathering, processing and other expenditures, and excluding acquisitions.  The company expects to complete approximately 480 net wells in 2017, compared to 445 net wells in 2016.  EOG anticipates flat to lower completed well costs in 2017 versus 2016 levels as continued efficiencies and service contract expirations are expected to offset potential cost increases.

Capital will be allocated primarily to EOG's highest rate-of-return oil assets in the Eagle Ford, Delaware Basin, Rockies and the Bakken.  After reducing the drilled uncompleted well inventory to a normal operating level in 2016, the company will increase its focus on its 6,000 remaining premium drilling locations.  EOG is capable of delivering very strong rates of return in the current commodity price environment through premium drilling combined with the company's expectations that well costs will remain flat or lower in 2017.  Premium inventory includes wells with a direct after-tax rate of return of at least 30 percent assuming $40 flat crude oil prices.

"EOG's goal during the last two years was to exit the industry downturn in better shape than when we entered it," Thomas said.  "We clearly accomplished that goal with spectacular improvements in all facets of the business.  We made major technology advances in our proprietary well targeting, completion designs, drilling practices and production operations.  EOG is now set to resume strong oil growth within cash flow." 

Delaware Basin
In the fourth quarter 2016, EOG continued active development of its world-class position in the Delaware Basin.  EOG integrated the assets acquired in the Yates transaction and further optimized its proprietary well targeting methods across its expanded position of 416,000 net acres.

EOG completed 17 wells in the Delaware Basin Wolfcamp in the fourth quarter with an average treated lateral length of 4,900 feet per well and average 30-day initial production rates per well of 2,405 barrels of oil equivalent per day (Boed), or 1,595 Bopd, 365 barrels per day (Bpd) of natural gas liquids (NGLs) and 2.7 million cubic feet per day (MMcfd) of natural gas.  In Lea County, N.M., EOG completed the Endurance 36 State Com #705H and #706H with an average treated lateral length of 7,000 feet per well and average 30-day initial production rates per well of 2,495 Bopd, 505 Bpd of NGLs and 3.7 MMcfd of natural gas.

In the Delaware Basin Bone Spring, EOG completed three wells in the fourth quarter with an average treated lateral length of 4,400 feet per well and average 30-day initial production rates per well of 1,680 Boed, or 1,280 Bopd, 180 Bpd of NGLs and 1.3 MMcfd of natural gas.  In Lea County, N.M., EOG completed the Della 29 Fed Com #602H with a treated lateral of 4,500 feet and 30-day initial production rates of 1,905 Bopd, 225 Bpd of NGLs and 1.7 MMcfd of natural gas.  This well is six miles north of EOG's next closest Bone Spring well.

In the Delaware Basin Leonard, EOG completed eight wells in the fourth quarter with an average treated lateral length of 4,600 feet per well and average 30-day initial production rates per well of 1,745 Boed, or 985 Bopd, 345 Bpd of NGLs and 2.5 MMcfd of natural gas.  In Lea County, N.M., EOG completed the Leghorn 32 State #201H with a treated lateral of 4,500 feet and 30-day initial production rates of 2,550 Bopd, 480 Bpd of NGLs and 3.6 MMcfd of natural gas.  This well is 12 miles north of EOG's next closest Leonard well.

South Texas Eagle Ford
EOG continued to achieve strong well results and efficiencies in the South Texas Eagle Ford in the fourth quarter 2016.  For the full year 2016, crude oil production declined just 8 percent year-over-year, despite a 28 percent reduction in the number of well completions.

In the fourth quarter, EOG completed 75 wells in the Eagle Ford with an average treated lateral length of 5,700 feet per well and average 30-day initial production rates per well of 1,190 Boed, or 990 Bopd, 85 Bpd of NGLs and 0.7 MMcfd of natural gas.  The fourth quarter 2016 completions in the Eagle Ford included 45 wells that were drilled prior to 2016.

South Texas Austin Chalk
EOG continued to test its position in the South Texas Austin Chalk, which lies above the South Texas Eagle Ford.  In the fourth quarter, EOG completed nine wells in the Austin Chalk with an average treated lateral length of 4,100 feet per well and average 30-day initial production rates per well of 1,975 Boed, or 1,475 Bopd, 220 Bpd of NGLs and 1.7 MMcfd of natural gas.

Rockies and the Bakken
During the fourth quarter, EOG significantly reduced its inventory of drilled uncompleted wells in the Rockies and the Bakken.       

In the Powder River Basin, EOG completed three wells in the fourth quarter with average 30-day initial production rates per well of 2,155 Boed, or 1,810 Bopd, 135 Bpd of NGLs and 1.3 MMcfd of natural gas. 

In the North Dakota Bakken, EOG completed 34 wells in the fourth quarter with average 30-day initial production rates per well of 820 Boed, or 715 Bopd, 55 Bpd of NGLs and 0.3 MMcfd of natural gas.  The fourth quarter 2016 completions in the Bakken included 31 wells that were drilled prior to 2016.

Reserves
At year-end 2016, total company net proved reserves were 2,147 million barrels of oil equivalent (MMBoe), comprised of 55 percent crude oil and condensate, 19 percent NGLs and 26 percent natural gas.  Net proved reserve additions from all sources excluding revisions due to price replaced 163 percent of EOG's 2016 production at a finding and development cost of $5.22 per barrel of oil equivalent.  Revisions due to price reduced net proved reserves by 101 MMBoe and asset divestitures decreased net proved reserves by 168 MMBoe.  Total company net proved reserves increased 1.4 percent in 2016 as proved reserve additions from drilling activities and revisions other than price offset the impact of asset divestitures and declines in commodity prices.  (For more reserves detail and a reconciliation of non-GAAP measures to GAAP measures, please refer to the attached tables.)

For the 29^th consecutive year, internal reserves estimates were within 5 percent of estimates independently prepared by DeGolyer and MacNaughton.

Hedging Activity
For the period January 1 through June 30, 2017, EOG has crude oil financial price swap contracts in place for 35,000 Bopd at a weighted average price of $50.04 per barrel. 

For the period March 1 through November 30, 2017, EOG has natural gas financial price swap contracts in place for 30,000 million British thermal units (MMBtu) per day at a weighted average price of $3.10 per MMBtu.  For the period March 1 through November 30, 2018, EOG has natural gas financial price swap contracts in place for 35,000 MMBtu per day at a weighted average price of $3.00 per MMBtu.

For the period March 1 through November 30, 2017, EOG sold natural gas call option contracts for 213,750 MMBtu per day at an average strike price of $3.44 per MMBtu.  For the period March 1 through November 30, 2018, EOG sold natural gas call option contracts for 120,000 MMBtu per day at an average strike price of $3.38 per MMBtu.

For the period March 1 through November 30, 2017, EOG purchased natural gas put option contracts for 171,000 MMBtu per day at an average strike price of $2.92 per MMBtu.  For the period March 1 through November 30, 2018, EOG purchased natural gas put option contracts for 96,000 MMBtu per day at an average strike price of $2.94 per MMBtu.   

For the period March 1 through November 30, 2017, EOG has natural gas collar contracts for 80,000 MMBtu per day at an average ceiling price of $3.69 per MMBtu and an average floor price of $3.20 per MMBtu.     

A comprehensive summary of crude oil and natural gas derivative contracts is provided in the attached tables.  

Capital Structure and Asset Sales
At December 31, 2016, EOG's total debt outstanding was $7.0 billion with a debt-to-total capitalization ratio of 33 percent. Considering cash on the balance sheet of $1.6 billion at the end of the fourth quarter, EOG's net debt was $5.4 billion with a net debt-to-total capitalization ratio of 28 percent.  For a reconciliation of non-GAAP measures to GAAP measures, please refer to the attached tables.

Proceeds from asset sales for the full year 2016 totaled $1.1 billion, which includes $662 million of proceeds from sales made during the fourth quarter 2016.  Associated production of the divested assets in 2016 at the time of each respective sale was an aggregate 220 MMcfd of natural gas, 4,000 Bopd and 8,800 Bpd of NGLs (this was partially offset by the full year impact of acquired production from the Yates transaction of 2,900 Bopd, 150 Bpd of NGLs and 20 MMcfd of natural gas).

Dividend
The board of directors declared a dividend of $0.1675 per share on EOG's Common Stock, payable April 28, 2017, to stockholders of record as of April 13, 2017.  The indicated annual rate is $0.67 per share.

Conference Call February 28, 2017
EOG's fourth quarter and full year 2016 results conference call will be available via live audio webcast at 9 a.m. Central time (10 a.m. Eastern time) on Tuesday, February 28, 2017.  To access the live audio webcast and related presentation materials, log on to the Investors Overview page on the EOG website at http://investors.eogresources.com/overview.  

EOG Resources, Inc. is one of the largest independent (non-integrated) crude oil and natural gas companies in the United States with proved reserves in the United States, Trinidad, the United Kingdom and China.  EOG Resources, Inc. is listed on the New York Stock Exchange and is traded under the ticker symbol "EOG."  For additional information about EOG, please visit www.eogresources.com.

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  All statements, other than statements of historical facts, including, among others, statements and projections regarding EOG's future financial position, operations, performance, business strategy, returns, budgets, reserves, levels of production, costs and asset sales, statements regarding future commodity prices and statements regarding the plans and objectives of EOG's management for future operations, are forward-looking statements.  EOG typically uses words such as "expect," "anticipate," "estimate," "project," "strategy," "intend," "plan," "target," "goal," "may," "will," "should" and "believe" or the negative of those terms or other variations or comparable terminology to identify its forward-looking statements.  In particular, statements, express or implied, concerning EOG's future operating results and returns or EOG's ability to replace or increase reserves, increase production, reduce or otherwise control operating and capital costs, generate income or cash flows or pay dividends are forward-looking statements.  Forward-looking statements are not guarantees of performance.  Although EOG believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct.  Moreover, EOG's forward-looking statements may be affected by known, unknown or currently unforeseen risks, events or circumstances that may be outside EOG's control.  Important factors that could cause EOG's actual results to differ materially from the expectations reflected in EOG's forward-looking statements include, among others:

• the timing, extent and duration of changes in prices for, supplies of, and demand for, crude oil and condensate, natural gas liquids, natural gas and related commodities;
• the extent to which EOG is successful in its efforts to acquire or discover additional reserves;
• the extent to which EOG is successful in its efforts to economically develop its acreage in, produce reserves and achieve anticipated production levels from, and maximize reserve recovery from, its existing and future crude oil and natural gas exploration and development projects;
• the extent to which EOG is successful in its efforts to market its crude oil and condensate, natural gas liquids, natural gas and related commodity production;
• the availability, proximity and capacity of, and costs associated with, appropriate gathering, processing, compression, transportation and refining facilities;
• the availability, cost, terms and timing of issuance or execution of, and competition for, mineral licenses and leases and governmental and other permits and rights-of-way, and EOG's ability to retain mineral licenses and leases;
• the impact of, and changes in, government policies, laws and regulations, including tax laws and regulations; environmental, health and safety laws and regulations relating to air emissions, disposal of produced water, drilling fluids and other wastes, hydraulic fracturing and access to and use of water; laws and regulations imposing conditions or restrictions on drilling and completion operations and on the transportation of crude oil and natural gas; laws and regulations with respect to derivatives and hedging activities; and laws and regulations with respect to the import and export of crude oil, natural gas and related commodities;
• EOG's ability to effectively integrate acquired crude oil and natural gas properties into its operations, fully identify existing and potential problems with respect to such properties and accurately estimate reserves, production and costs with respect to such properties;
• the extent to which EOG's third-party-operated crude oil and natural gas properties are operated successfully and economically;
• competition in the oil and gas exploration and production industry for the acquisition of licenses, leases and properties, employees and other personnel, facilities, equipment, materials and services;
• the availability and cost of employees and other personnel, facilities, equipment, materials (such as water) and services;
• the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise;
• weather, including its impact on crude oil and natural gas demand, and weather-related delays in drilling and in the installation and operation (by EOG or third parties) of production, gathering, processing, refining, compression and transportation facilities;
• the ability of EOG's customers and other contractual counterparties to satisfy their obligations to EOG and, related thereto, to access the credit and capital markets to obtain financing needed to satisfy their obligations to EOG;
• EOG's ability to access the commercial paper market and other credit and capital markets to obtain financing on terms it deems acceptable, if at all, and to otherwise satisfy its capital expenditure requirements;
• the extent to which EOG is successful in its completion of planned asset dispositions;
• the extent and effect of any hedging activities engaged in by EOG;
• the timing and extent of changes in foreign currency exchange rates, interest rates, inflation rates, global and domestic financial market conditions and global and domestic general economic conditions;
• political conditions and developments around the world (such as political instability and armed conflict), including in the areas in which EOG operates;
• the use of competing energy sources and the development of alternative energy sources;
• the extent to which EOG incurs uninsured losses and liabilities or losses and liabilities in excess of its insurance coverage;
• acts of war and terrorism and responses to these acts;
• physical, electronic and cyber security breaches; and
• the other factors described under ITEM 1A, Risk Factors, on pages 13 through 22 of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and any updates to those factors set forth in EOG's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements may not occur, and, if any of such events do, we may not have anticipated the timing of their occurrence or the duration and extent of their impact on our actual results.  Accordingly, you should not place any undue reliance on any of EOG's forward-looking statements. EOG's forward-looking statements speak only as of the date made, and EOG undertakes no obligation, other than as required by applicable law, to update or revise its forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.

The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose not only "proved" reserves (i.e., quantities of oil and gas that are estimated to be recoverable with a high degree of confidence), but also "probable" reserves (i.e., quantities of oil and gas that are as likely as not to be recovered) as well as "possible" reserves (i.e., additional quantities of oil and gas that might be recovered, but with a lower probability than probable reserves).  Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include "potential" reserves and/or other estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC's latest reserve reporting guidelines.  Investors are urged to consider closely the disclosure in EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, available from EOG at P.O. Box 4362, Houston, Texas 77210-4362 (Attn: Investor Relations). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov.  In addition, reconciliation and calculation schedules for non-GAAP financial measures can be found on the EOG website at www.eogresources.com.